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Tightening credit for high-end home purchases may hit property market
25/05/2019 10:30 | Source: Vietnamnews
Property experts warned that if credit policies for high-end home purchases were tightened strictly, it could lead to a shock for the domestic real estate market.

According to a draft circular the State Bank of Vietnam (SBV) about limits and safety ratio for banks’ operation recently made public, it plans to apply a credit risk ratio of 150 percent for loans to purchase home worth from VND3 billion ($126,000), three times higher than the current ratio.

Limiting loans for luxury home purchases aimed to ensure the sustainable development of the real estate market and safety of the banking sector, said the central bank.

However, financial and banking expert Nguyen Tri Hieu said raising the credit risk ratio would push up lending interest rates for luxury home purchase loans, which would harm the liquidity of this segment.

Tightening credit for high-end home purchases
Tightening credit for high-end home purchases could lead to a shock for the domestic real estate market, experts have warned

Deputy Secretary of the Vietnam Real Estate Association (VNREA) Nguyen Van Dinh said tightening credit for luxury home purchases could help direct market demand more to the medium segment.

Eventhough the growth of the mid-end housing segment needed to be encouraged, it was not necessary to sacrifice the luxury segment as the market still had demand for luxury homes, especially from foreigners, he explained.

He pointed out the property market and the high-end segment in particular recently did not see any unusual developments, affirming that it was not necessary to tighten credit policy for luxury home purchases. 

Mr Dinh added if this policy for luxury home purchases must be applied, the central bank should consider an appropriate length of time for the policy.

He noted policy making needs careful consideration to ensure the balanced development of the property market.

Most buyers of luxury homes used banking credit for the purchases, said Nguyen Anh Tuan, Deputy Chairman of property developer HD Mon Holdings. He also stressed the important roles of interest rates and credit policies in increasing liquidity of housing projects.

He added tightening credit policies for luxury home purchases would create a market shock with several consequences amid a slow-down in supply and liquidity.

The businessman recommended that banks evaluate the financial capacity of buyers to decide the loans, instead of applying the policy for the whole luxury home segment.

Also, VNREA proposed the central bank raise an appropriate roadmap for tightening credit for the property market. Credit policies could be tightened for land purchases which were mainly for speculation while it was not necessary to tighten credit for housing purchase as housing purchases could stimulate other industries such as construction, steel and cement production.